Court’s Decision:
The Calcutta High Court dismissed the execution petition filed under Section 36 of the Arbitration and Conciliation Act, 1996, seeking enforcement of a mediated settlement agreement dated 10 September 2024 as an arbitral award. The Court held that the Memorandum of Settlement did not qualify as a final and binding settlement agreement under Section 74 of the 1996 Act. It observed, “The dispute resolution clause takes away the colour of finality from the said document.” Consequently, the matter must be resolved in accordance with the arbitration clause contained in the agreement itself.
Facts:
The dispute involved two business groups — ASA Group and EPI Group — who were previously engaged in financial and managerial dealings concerning a jointly controlled company (respondent no. 8). The EPI Group had advanced accommodation loans to the ASA Group, and upon default in repayment, the parties entered into two agreements — one in 2015 and another in 2018 — involving share transfer and board control in the joint company. Disputes arose due to non-adjustment of outstanding dues and disagreements over control and ownership, which were initially referred to arbitration in 2021 but later discarded by mutual consent.
On 2 August 2023, the parties entered into a formal mediation agreement appointing an advocate as mediator. The mediation culminated in a Memorandum of Settlement on 10 September 2024. The ASA Group (petitioners) filed for enforcement of this settlement as an arbitral award under the 1996 Act.
Issues:
- Whether the Memorandum of Settlement dated 10 September 2024 qualifies as a mediated settlement agreement under the Arbitration and Conciliation Act, 1996.
- Whether the mediated settlement agreement has attained finality and can be executed under Section 36 of the 1996 Act.
- Whether the existence of an arbitration clause within the settlement agreement ousts the execution jurisdiction of the court.
Petitioner’s Arguments:
The petitioners contended that the mediated settlement had the force of an arbitral award under Section 74 of the 1996 Act, as it was signed by both parties and authenticated by the mediator. They argued that since the Mediation Act, 2023 was not fully notified — particularly Sections 27 to 29 — the enforcement must be under the 1996 Act. They emphasized that:
- The mediation commenced before the 2023 Act came into force.
- The parties had voluntarily resolved all disputes, reduced them into writing, and the agreement was binding.
- Clause 50 of the agreement, which provides for arbitration, was meant only for disputes arising during enforcement and not regarding the validity of the agreement itself.
Respondent’s Arguments:
The respondents argued that:
- The so-called mediated agreement lacked finality and was not signed with the understanding of being binding.
- They were led to believe it was a draft or interim step, expecting further negotiations.
- The agreement was signed in good faith, and their concerns were recorded in letters to the mediator.
- Clause 50 of the settlement itself provided that disputes regarding the agreement’s validity, construction, or interpretation were subject to arbitration.
- The 180-day mediation period under the August 2023 agreement had lapsed, rendering the process terminated.
They relied on the Supreme Court decision in Mysore Cements Ltd. v. Svedala Barmac Ltd., (2003) 10 SCC 375, to argue that the agreement lacked essential elements of a valid and enforceable settlement.
Analysis of the Law:
The Court considered Sections 72 to 74 and Section 30 of the Arbitration and Conciliation Act, 1996, which provide that:
- A settlement agreement arrived at during conciliation becomes final and binding when signed by the parties and authenticated by the conciliator.
- Such an agreement then has the same effect as an arbitral award.
The Court emphasized that for a settlement to qualify as an award under Section 74, it must reflect an unequivocal final agreement. It also noted that even if some terms in the agreement suggested finality, Clause 50 created a mechanism for resolving disputes about the agreement itself, thereby undermining its conclusiveness.
Precedent Analysis:
The Court referred to the Supreme Court’s decision in Mysore Cements Ltd. v. Svedala Barmac Ltd. to highlight the legal standard for a document to be treated as a final and binding award. It reiterated that ambiguity regarding consent, doubts about execution procedures, or lack of clarity on settlement terms would disqualify such documents from enforcement under Section 74.
Court’s Reasoning:
Justice Shampa Sarkar noted:
- “The way the dispute resolution clause has been framed, it does not indicate that reference to arbitration can be made only if in the future, disputes arise while implementing the terms of settlement.”
- The respondents had raised immediate objections and alleged misunderstanding.
- The mediator himself declined to treat the document as conclusive and asked the parties to appoint a new mediator or arbitrator.
- The procedural requirements under Sections 72 to 74 were not satisfied, as there was no conclusive mutual agreement and ongoing disputes persisted about the document’s validity.
Hence, the document could not be enforced as an award under the 1996 Act.
Conclusion:
The Calcutta High Court dismissed the execution application, holding that the Memorandum of Settlement dated 10 September 2024 lacked finality, and the parties must proceed under the dispute resolution mechanism outlined in Clause 50 — including mediation and, if required, arbitration.
Implications:
This judgment reinforces that for a mediated settlement to be enforced as an arbitral award under Section 74 of the 1996 Act, the document must be free from ambiguity, reflect a concluded agreement, and be beyond challenge on grounds of coercion, misunderstanding, or ongoing negotiation. It also highlights that even the existence of a mediator’s signature cannot override a dispute resolution clause invoking arbitration.
FAQs
Q1. Can a mediated settlement agreement be enforced as an arbitral award under Indian law?
Yes, under Section 74 of the Arbitration and Conciliation Act, 1996, a conciliation agreement signed by the parties and authenticated by the mediator can be enforced as an arbitral award, provided it is final, clear, and mutually accepted.
Q2. What happens if a dispute arises regarding the validity of a mediated settlement?
If the agreement contains a dispute resolution clause (like arbitration), such disputes must be resolved under that mechanism. A court may refuse to execute it as an award if questions of validity or consent exist.
Q3. Does the Mediation Act, 2023 apply to mediation proceedings commenced before it was notified?
No. As held in this case, Section 56 of the Mediation Act, 2023, excludes its applicability to mediations commenced before its enforcement, and provisions like Section 27 (execution) are not yet notified.
Referenced Cases:
Mysore Cements Ltd. v. Svedala Barmac Ltd., (2003) 10 SCC 375 – The Court relied on this judgment to affirm that settlement agreements lacking finality, clarity, or mutual intent cannot be enforced as awards.
